Iowa Poll: Iowans ambivalent on business tax cuts

Slashing taxes on commercial properties fails to win support from a majority of poll respondents

Feb. 16, 2013

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About the poll

The Iowa Poll, conducted Feb. 3-6 for The Des Moines Register by Selzer & Co. of Des Moines, is based on interviews with 802 Iowans ages 18 or older. Interviewers contacted households with randomly selected landline and cellphone numbers. Responses were adjusted by age and sex to reflect the general population based on recent census data. Questions based on the sample of 802 Iowa adults have a maximum margin of error of plus or minus 3.5 percentage points. This means that if this survey were repeated using the same questions and the same methodology, 19 times out of 20, the findings would not vary from the percentages shown here by more than plus or minus 3.5 percentage points. Results based on smaller samples of respondents — such as by gender or age — have larger margins of error. Republishing the copyright Iowa Poll without credit to The Des Moines Register is prohibited.

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Cutting commercial property taxes is a top priority for Iowa Gov. Terry Branstad and lawmakers from both parties, but the Iowans they represent are far more ambivalent on the issue.

Slashing taxes on business properties — a proposal now in its third year of legislative debate — failed to win support from a majority of respondents in The Des Moines Register’s latest Iowa Poll, and many Iowans say the taxes should not be cut at all.

The result was just one of several views on state taxing and spending highlighted by the statewide poll.

Iowans also strongly support reducing taxes on the state’s lowest income earners, prefer greater investments in state programs over new tax breaks, and are lukewarm on allowing more tax credits for business growth.

Regarding possible cuts to commercial property taxes, a quarter of Iowans say the governor’s plan to reduce the amount property owners pay by 20 percent is the right step, but believe a bigger cut could threaten the state budget. Another 24 percent call the tax cut a step in the right direction, but believe it doesn’t go far enough.

Taken together, those figures suggest 49 percent — just short of a majority — support the concept of a tax break for the owners of commercial and industrial properties.

Poll respondent Ned Hodgson of Rock Rapids called the difference between commercial and residential property taxes “alarming,” but believes a reduction to commercial rates shouldn’t strain state finances.

“A cut in that direction would help business owners out to an extent that it doesn’t hurt our bottom line as bad,” he said. “But on the flip side, I do also understand that a huge cut in commercial property taxes could ... hurt the state’s bottom line.”

Hodgson, 43, is co-owner, along with his wife and two other couples, of Tattered Treasures, a shop in Rock Rapids that repurposes furniture and decor.

“Hopefully they could have a compromise where it could benefit business owners and not hurt the state too bad,” he said.

Given the complexities of Iowa’s property tax system and the difficulty of explaining how tax breaks for businesses benefit average Iowans, those poll results represent a victory, said Jeff Boeyink, Branstad’s chief of staff.

“It’s never easy to promote a tax cut that people initially believe is strictly for business,” he said. “If people are asked whether they’d rather have their own personal taxes cut or cut a tax for a business, we know where they’re going to land.”

The fact that nearly half of Iowans see a benefit to cutting commercial property taxes is a testament to the Republican governor’s efforts to highlight the issue, Boeyink said. Branstad first became aware of the issue on the campaign trail in 2010, and has championed it since taking office in 2011. Legislative Republicans and Democrats have failed to hammer out a deal in each of the last two years, despite both sides calling it a high priority.

Other Capitol players, though, noted a large slice of poll respondents — 41 percent — say commercial property taxes should not be cut at all.

“They understand if it’s as simple as cutting commercial property taxes, they’re probably going to end up picking up the tab,” Gronstal said of those who oppose the reduction.

Both the governor and House Republicans have said their property tax proposals, like the Democrats’, will not result in such a “tax shift.”

But David Goodner, a community organizer for the advocacy group Iowa Citizens for Community Improvement, said the polling revealed that the approaches offered by Republicans and Democrats alike are out of step with popular sentiment.

“The elite consensus — the Gronstal-Branstad consensus — is that commercial property taxes have to be done,” Goodner said. “But the polling suggests that Iowans do not have the same type of consensus as policymakers do on the issue.”

The poll also probed Iowans’ views on the state’s massive budget surplus — estimated for the current year at somewhere around $800 million.

The largest plurality, at 45 percent, say lawmakers should tap the surplus to devote more money to education reform, another of Branstad’s key initiatives this year. Twenty-two percent favor an income tax credit being pushed by House Republicans worth perhaps $375 for each Iowa taxpayer. Twenty percent support using surplus funds to expand the Medicaid health care program for the poor and just 7 percent believe cutting commercial property taxes would be a good use of the unspent funds.

Poll respondent Janet Jensen of rural Marshalltown told the pollster she favored an expansion of Medicaid, but said in a follow-up interview that she also would support using state surpluses to improve roads and bridges. She is wary of simply returning the surplus to taxpayers because she doesn’t believe doing so would have any positive effect on the economy. Additional spending on programs and services, by contrast, represent “an investment in our future.”

“The last time, on a national level, when they had all these big tax breaks, then the next thing you know we’re in trouble and we need to raise taxes or do something to raise the money,” said Jensen, 62.

The emphasis on education in particular and relative lack of interest in tax breaks isn’t surprising, several Capitol observers said.

“Iowans are a compassionate people, they care about education, and that’s going to be a priority,” Boeyink said. The governor’s education reform proposal is estimated to cost $187 million a year once fully phased in, and would draw down the state’s surplus over a period of years as it’s implemented.

The apparent preference for investing the surplus in state programs, rather than returning it to taxpayers, is evidence of a misconception among Iowans about government’s role, said Lindsay McQuarry, policy director for Iowans for Tax Relief.

Despite the poll results, most Iowans are satisfied with the services they’re receiving, she argued. That such a high proportion favor increased spending indicates a lack of perspective on the state’s $6 billion budget.

“When (government) has the ability to meet all the needs they have with the tax dollars they have without going into the surplus, we shouldn’t be looking for extra things to spend it on,” McQuarry said. “If we already are able to meet the needs of the taxpayer then we should be returning it.”

Goodner said poll results showing that twice as many Iowans support using the surplus to fund education or health care programs rather than tax breaks undermine the Republican argument they have “overpaid” the state.

“Iowans care about their communities and, based on the polling numbers, they would rather devote more money to education and Medicaid than to get a personal benefit from a one-time tax break,” he said. “That shows that Iowans care about the common good more than about their own individual benefit.”

But House Speaker Kraig Paulsen, R-Hiawatha, saw the poll results as an indication that Iowans want a “balanced approach” that spends more in targeted areas, while also providing relief to taxpayers.

“The takeaway from this is that Iowans recognize there are some reasonable investments that need to be made, and that this ending balance provides that opportunity,” he said.

Seventy-one percent of Iowans support reducing taxes on low-income earners, a result that appears to bolster calls from Democrats for expanding the Earned Income Tax Credit. Lawmakers twice approved such an expansion in 2011, but saw the bill vetoed each time by Branstad.

Gronstal promised that the tax credit would pass the Senate again this year, calling it “unfinished business.”